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19. Mention which of the two output gap occurs in the following cases: recessionary gap or...

Question

19. Mention which of the two output gap occurs in the following cases: recessionary gap or...

19. Mention which of the two output gap occurs in the following cases: recessionary gap or inflationary gap? a. the economy i

19. Mention which of the two output gap occurs in the following cases: recessionary gap or inflationary gap? a. the economy is creating less output than its potential b. the economy is creating more output than its potential

Answers

a. Recessionary gap. It is a positive GDP gap where actual GDP is less than potential GDP.

b. Inflationary gap. It is a negative GDP gap where actual is greater than potential GDP.


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